HollyFrontier beats as Permian, Canadian crude drive margin gains

(Reuters) - U.S. independent refiner HollyFrontier Corp HFC.N posted a 70 percent rise in first-quarter refining margins on Wednesday, benefiting from discounted costs of crude from the Texas-centred Permian basin and Canada.

Shares in the company hit an all-time high of $63.57, up 24 percent this year, after it reported a 30-cent beat on first-quarter profit and said it had resumed share buybacks after a two-year gap.

Prices of sweet, light crude coming out of West Texas — the primary source of supply for smaller, nearby refiners like HollyFrontier — fell to more than three-year lows at the start of this year compared to U.S. oil futures, due to surging production in the Permian.

Midland Texas crude tends to trade at a discount to U.S. crude futures CLc1.

Meanwhile, transport bottlenecks in Canada have depressed prices of crude from the country.

“We were able to capitalize on favorable crude differentials and strong product crack spreads in our market,” Chief Executive Officer George Damiris said on a post-earnings call with analysts and investors.

HollyFrontier said it expects wider Permian and Canadian crude differentials to support margins in the second quarter.

The Dallas-based company's refinery gross margins rose to $12.83 per barrel in the first quarter, up $5.29 from the year-ago period, outpacing margins at larger rivals such as Valero Energy Corp VLO.N and Marathon Petroleum Corp MPC.N.

“HFC’s 74 percent index capture rate during the quarter was the highest quarterly average since the third quarter of 2015,” Jefferies analysts wrote in a note titled ‘The Right Place at the Right Time’.

Net income attributable to shareholders was $268.1 million, or $1.50 per share, in the first quarter ended March 31, compared to a loss of $45.5 million, or 26 cents per share, a year earlier.

Excluding items, the company earned 77 cents per share beating analysts’ average estimate of 38 cents, according to Thomson Reuters I/B/E/S.

Sales and other revenue rose 34 percent to $4.13 billion.

Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Shounak Dasgupta